Turkish assets fall as Twitter ban raises political tension

ISTANBUL (Reuters) - Turkish assets dropped on Friday after Turkey's courts blocked access to Twitter, unnerving investors and raising uncertainty just days before local elections.

The lira weakened to 2.2387 against the dollar by 0951 GMT, from 2.2371 late on Thursday.

In the aftermath of the launch of a corruption probe, social media platforms in Turkey have been awash with alleged evidence of government wrongdoing in what Prime Minister Tayyip Erdogan has cast as a plot to unseat him before municipal polls on March 30.

"It remains to be seen whether (the ruling) AK Party will benefit or suffer from the Twitter ban in the upcoming elections," said Inan Demir, chief economist at Finansbank.

"However, from a purely markets perspective, the whimsical/erratic attitude of the government can only add to Turkey's risk premium."

Investors have reacted cautiously to the allegations. Prior to the Twitter block, laws were passed to tighten internet controls and give the ruling party more control over the judiciary and prosecutors.

For more than six months, the Turkish lira has been under strain from fears that the winding down of U.S. Federal Reserve bond buying would dry up cheap the capital inflows which have financed its gaping current account deficit.

"This being a small, open economy with a large current account deficit, open disregard of the international community is a serious concern for external financing prospects," Demir said.

After the lira plunged to 2.39 against the dollar in late January in a sharp emerging market sell-off, the Turkish central bank finally answered market calls for meaningful monetary tightening to support the lira with hikes across all key rates.